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Bengaluru: Godrej Properties Ltd has raised $275 million for Godrej Residential Investment Program II (GRIP-II), a pool of capital to invest in residential projects, from a clutch of investors with Dutch pension fund asset manager APG Asset Management NV as the lead investor.

The Mumbai-based developer said it has created a separate real estate fund management business in India and Singapore—Godrej Fund Management (GFM)—and the capital has been raised through this.

The Godrej-APG alliance will identify land parcels and develop four to five residential projects in Mumbai, Pune, Bengaluru and the national capital region (NCR).

In 2012, Godrej Properties and an APG-led investor consortium struck a partnership, one of the first of its kind, to jointly invest 770 crore in residential projects. While GRIP-II is a follow-on residential development platform, GFM will take on the new role of managing and advising investors on investments with Godrej Properties in India. The latter will hold a 20% stake in the second platform.

Karan Bolaria, who has been with Godrej Properties since 2008, will head GFM and will be responsible for managing both series of the residential investment programmes as well as any future strategies that GFM will undertake.

“The new GRIP-II platform in partnership with APG will help us attract high-quality, long-term equity investors to partner with us in our developments across India. This fits well with our strategy of deepening our presence across the country’s leading real estate markets while maintaining a capital-light development strategy," said Pirojsha Godrej, managing director and chief executive, Godrej Properties.

Godrej said that the decision to venture into a fund management role, with GFM, was a logical progression and a strategic one. “It opens up a new line of business for us, which is aligned with our residential development business and going forward, we may do more fund-raising," he said.

Over the past three years or so, large sovereign wealth funds, pension funds and other global investors have partnered developers in India to create investment platforms, which typically start with a pilot investment, after which the investor makes a larger commitment to jointly make more transactions (see table).

The first Godrej-APG fund has been deployed through five projects. Last year in July, the last deal was inked, when they bought 18 acres of land from realty firm Puravankara Projects Ltd, off Kanakpura Road in Bengaluru, with which the corpus was fully deployed. The second fund will be deployed over the next two to three years, with a development timeline of six to seven years.

“Our strategy of partnering with only the best local operators has allowed us to succeed in a complex residential development market like India’s. In spite of a general slowdown in the asset class in the country over the last three years, our partnership projects have sold well, which is a testament to our partner’s execution capability and brand strength. We look forward to deepening the collaboration between our groups and supporting Godrej Fund Management," said Sachin Doshi, managing director and head of private real estate investments, Asia Pacific, APG.

While the traditional way of multiple limited partners (LPs) putting money in blind pool funds, managed by fund managers, will continue, large investors are also finding comfort in forging exclusive partnerships with top developers.

“Partnerships with large, established developers, gives investors more control over their investments and the quality of the developments, given the track record of the developer. The only downside is backing a single developer, but that’s a calculated risk given his pedigree," said Chintan Patel, partner, transactions and restructuring, real estate and hospitality, KPMG India.

In a capital-intensive sector such as real estate, Patel sees more such partnerships, both new ones and expansions of existing ones, taking shape.

Godrej Properties rose 2% to close at 287.65 a share on BSE on Monday, while the benchmark Sensex rose 1.33% to close at 25,285.37 points and the BSE Realty Index closed up 1.78% at 1,201.56 points.

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